Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)The July CPI rose .2% m/o/m both headline and core exactly as expected. Due to rounding, the y/o/y rise of 3.2% was one tenth below the forecast but the core rate at 4.7% was as anticipated. These compare with 3% and 4.8% respectively in June. Food prices were up .2% m/o/m and 4.9% y/o/y. Services inflation ex energy prices were up .4% m/o/m and by 6.1% y/o/y. Core goods prices fell .3% m/o/m and up a slight .8% y/o/y. 

2)Producer prices in July were about in line when combined with the June revision. It was up .8% y/o/y headline and 2.4% core, both one tenth above the estimate (rounding and multi month revisions). Still benign right now compared to what we’ve seen. Food prices rose .5% m/o/m, though little changed y/o/y. Energy prices were flat m/o/m and down almost 17% y/o/y. Core goods prices were unchanged m/o/m and up 1.9% y/o/y. Services inflation jumped .5% m/o/m and 2.5% y/o/y driven by trade, transportation and warehousing. Also, there was a 7.6% increase in the prices for ‘portfolio management’, I guess due to the jump in asset prices.

3)The NFIB small business optimism index for July rose to 91.9 from 91 and that matches the best level since last September though the index has been in a pretty tight range of 89-92 over the past year and compares with 104.5 in February 2020. While we saw the improvement in optimism, the NFIB still used the word 'dismal' and said "With small business owners' views about future sales growth and business conditions dismal, owners want to hire and make money now from solid consumer spending. Inflation has eased slightly on Main Street, but difficulty in hiring remains a top business concern." Specifically on credit, 4% "reported that financing was their top business problem, up 2 pts" and "The average rate paid on short maturity loans was 8.5%, .7 of a percentage point below June's highest reading since June 2007."

4)Reported last Friday, C&I loans outstanding picked up by $2.9b for the week ended 7/26.

5)China is again widely allowing international group tours. Unleash the Chinese tourist again after spending $250b in 2019 outside of China.

6)Thanks to lower food prices (particularly pork), headline CPI in China fell 1.7% y/o/y. Ex food and energy though saw prices up .8% y/o/y, a 6 month high. The Chinese consumer benefits from most price changes.